 Increase the cost of the inventory by doing the same thing to it, which in this case would be another debit So there we have that now let's post it something's in inventory and so in seven I'm gonna double-click on it go to the end of it and say plus and then point to the inventory That will make it go up in the debit direction now. We're out of bounds by 110 I'm gonna go to cash in in five and say equals and point to the 110 and Enter that will make cash go down and we're back in balance So we're now on seven eight where it says we sold merchandise for cash All right, we sold for cash this time so we're on seven eight and Once again, it's just like this journal entry up here, but now we sold it for cash. So is cash affected? Yes, we and and we do want to think about this in terms of two journal entries again So there's gonna be a sales half There's gonna be a half having to do with inventory the sales half has nothing to do with inventory We can think of it as if it was a service industry. So is cash affected? Yes, we received cash. So cash is going up cash is the debit balance We're gonna make it go up by doing the same thing to it which in this case would be another debit So I'm gonna copy that I'm gonna paste it one two three on top and we sold it For cash sales price being 2200 so we're gonna say it's 2200 and we're gonna credit something for that same amount So I'm gonna credit something for the 2200 as well And what are we gonna credit? Why are we getting paid cash because we worked? We did something and generated or earned revenue and how did we work? We gave something we gave the we gave the merchandise so revenue We can see here is the sales account and we could have called it anything. We could have called it income revenue It's all the same type of account. It's in the revenue account section It has a credit balance. We need to make it go up and it only goes up sales only goes one way generally So we're gonna make go up by doing the same thing to it which in this case is a credit So I'm gonna copy that kind of paste it one two three right underneath And I'm gonna post this out and then talk and worry about the Inventory half of this journal entry. So something's in cash. I'm gonna double click on it I'm gonna go to the end of it gonna say plus and we could see what's in there anything related To cash of course should be in there. So we can see e15 in there and now we're gonna add to that this cell which is in D 17 and enter cash goes up then we're gonna go to sales same thing something's in there So I'm gonna double click I can see what's in there this sales accounts in there gonna say plus Remember, there's never gonna be a negative number in this area the negatives in here So we don't have to put a negative on this side always equals and pluses gonna point to the 2002 Sales will go up net income will go up and there we have that now we're gonna have to say that well the Inventory must have gone down because we gave inventory a whey Inventory has a debit balance. We need to make it go down. So I'm gonna do the opposite thing to it Which in this case is a credit. So I'm gonna copy that. I'm gonna skip the line Here's where the new journal entry starts, but I'm gonna put it on the bottom So I'm down here on cell 21 right-click and paste one two three And I'm gonna put it in the credit column the amount being this one eight So I'm gonna say negative one eight zero zero and we're also gonna need a debit So I'm gonna put that on top and to the left of one eight zero zero. You could type it in there I like to put this negative and Equals that sign to have everything kind of connected and what's that gonna be that's gonna be an expense related us Consuming the inventory in order to help us generate this revenue. That's called cost of goods sold It is an expense account expense accounts have debit balances. They generally only go up We're gonna make it go up by doing the same thing to it which in this case would be another debit that debit We'll make net income go down. Let's see that as we post that gonna double-click on the cost good sold We can see that this account is in there gonna go to the end of it and Plus then point to the one eight and this should go up in the debit direction like so and it brings net income down Note that we're saying here's income is the good the credit is actually the good thing on the income statement Minus the expenses adds up to the 88. I mean the 858. That's our net income Then we're gonna go to merchandise inventory up here in in seven double-click go to the end I'm gonna say plus and point to this I'm out here. Now, of course, we're getting a lot of stuff in here But just remember that it should be everything related to the merchandise inventory And we're gonna say enter and if we want to see what's in there We can always click on this and it's in the data tab Or the formulas tab and we could go to this trace and that will show you the numbers that are in there So this minus this plus this minus this makes up the 5,000 Plus this minus this plus this minus this will bring us to the nine two six eight I usually keep those up here because I really like those and so I'm gonna get rid of that All right, so now we're gonna go to the seven nine seven nine and Sell b23 which says that we purchased merchandise from L company terms 215 and 30 and before I go into that any further I just want to point out that when we recorded this accounts receivable up here This was this thousand dollars. It was from C company. We should report that in our subsidiary ledger as well So I'm actually gonna post that in the accounts receivable subsidiary ledger You can see it has a red zero here because it's saying hey your subsidiary ledger here doesn't tie out to the here And the way we're gonna do that. We're gonna say here C owes us that one thousand So I'm gonna say that one thousand is owed from C and Now we have the one thousand ties out the one thousand adds up to here We can see who owes it. It's C same with this one the six five on the on the payable side is owed by B That's why we have a green number there. All right So now seven nine purchase merchandise from L company terms to 15 and 30 So we're purchasing the merchandise We're purchasing it from L and the terms mean that we get a 2% discount if we pay within 15 days Otherwise, we have to pay it within 30 days or they might come after us at that point in time And so we're gonna record it at this time As if we're not gonna take the discount and then if we take the discount then we'll account for that when we Pay the payment. So we don't really even need to know this for this point We're gonna need to know it when we make the payment if we pay it within 15 days We do need to know that we paid it on account. So is cash affected? No, we paid it on account That's why we have terms and therefore I used to like to think of what did we receive? We received inventory Inventory is an asset assets have debit balances as we can see here with no brackets We need to make it go up. How do we make something go up? We do the same thing to it which in this case would be another debit So I'm gonna copy that I'm gonna put it on top gonna right-click and haste it one two three So then we're gonna have to put the amount being Seven nine two five and we're going to credit something for the same amount So what's the amount that will be credited? Well, it's not cash because we bought it on account It's gonna be accounts payable accounts payable has a credit balance We're gonna make it go up by doing the same thing to it which in this case would be another credit So I'm gonna copy that gonna put our cursor in C24 right-click paste it one two three So now let's post this out. So I'm gonna go up here to merchandise inventory Something's in it. I'm gonna double-click on it. Go to the end of it. Say plus point to this to five and Enter merchandise inventory goes up. Then we're gonna go to accounts payable gonna double-click on it Go to the end of it say plus and then point to the accounts payable and this is a credit This is a credit gonna make the accounts payable go up in the credit direction So there we have it back and balance no effect on net income from that transaction Alright next transaction. We're getting down on the book on the bottom here. We're gonna say at 7-11 We return merchandise. Oh one thing we should do note if I go over here that it's it's not it's red now Which indicates it's bad because the six five does not equal the nine hundred And that's because now we have to represent the fact that on the subsidiary ledger for accounts payable Who owes us money? L owes us money. So over here in the credit side for L and V atm and say that equals the credit of two five and enter and now we have the 9,000 here ties out to the 9,000 here and we're back in balance and we're good to go So now 7-11. Okay, so we returned merchandise to L so that means There was defective merchandise and we gave it back to L. We said this is defective. We counted it It doesn't work or something's wrong with it We're gonna give it back to L if L accepts it then they'll give us a refund now in this case Of course, we have not yet paid L. So is they're gonna give us cash? Is cash affected? No He didn't we didn't pay him yet. So what's gonna happen then is we're gonna reduce the payable that is owed So again, it's kind of harder a lot of times for people to think about the payable It's a lot easier a lot of times to think about which way the inventory is going So inventory has a debit balance. We gave it back. So it needs to go down How do we make something go down? We do the opposite thing to it which in this case is a credit So I'm gonna copy this I'm gonna go down here. I'm gonna go to the bottom of it So there's the I'm gonna go to the bottom of the insult 20 or row 27 right-click paste it 1 2 3 We gave back inventory that cost us $500 then we're gonna have to debit something again If we paid cash for it then we think maybe they give us cash back, but we haven't paid him yet So we have to debit the payable payable as a credit balance if we debit it it'll make that balance go down So I'm gonna right-click copy that Gonna put it in cell C 26 right-click and paste it 1 2 3 So let's post that out and see what happens. So we're gonna go to the accounts payable and sell in In eight double-click on it go to the end of it Plus and I know we have to scroll down a little bit I'm using my scroller to scroll down a little bit so I can see the last journal entry we made There's the 500. I don't have to scroll back up to hit enter I can just hit enter now and it does it for me. So if I scroll up a little bit there It is so now it went down from 9000 down to 8 5 then the second account will go to The merchandise inventory another thing you can do here if you want to see it all in one page is we can look We can shorten the screen from a hundred down to like 80 or so and we can see more of the screen at one time And we can go to the merchandise inventory Double-click go to the end of it and plus and then I'm going to point to the 500 Credit that will put us back in balance bring Inventory down when we hit enter Okay, so now you can see that once again. We have this negative or this red 9000 here and that's because we don't O L 5000 anymore because we gave back some of the inventory so we're gonna debit part of that So I'm basically just gonna record this again in U 19 for this 500 meaning that we O L now 2000 we O B 65 for total of 8 5 that ties out to our subsidiary ledger So we need to know that because we need to know who we owe the money to obviously and we know who owes us money so we can collect and pay as needed alright, so now we're gonna go down to B 29 where we have 7 12 and We received the balance due from C company for invoice on 7 2 So C company now paid us now notice. There's no dollar amount there. We're gonna go. How are we gonna find that out? Well, we can look at our Receivable now in this case, it's pretty basic because there's only one person that owes this money But if there were more people in there, then we'd have to look at the subsidiary ledger over here and say well Who owes us that money and we could see that see owes us that entire $1,000 now the question is did they pay us within the discount period and if we look over here They're supposed to pay us within 10 days and that happened on 7 2 and they paid us on 7 12 so they did just make it within the 10 days So they're gonna get a discount so they're not actually gonna pay us the $1,000 They're gonna pay us 1,000 less the discount So there's a couple different ways we can think about how to get the discount amount So let's do that now. We know that is cash affected. Yeah, we're gonna get paid cash We got to check in the mail from C for the sale that was made in the past terms 210 and 60 So cash as a debit balance, we're gonna make it go up by doing the same thing to it Which in this case would be another debit, so I'm gonna scroll down here I'm gonna paste it 1 2 3 and then we could try to think about the amount a couple ways We can calculate this if we pull out the trusty calculator here. We sold it for $1,000 We gave a 2% discount times 0.02 so that means that we're gonna give a discount of $20 $20 minus $1,000 means we're gonna get 980 We can also think of it is if we're thinking a 2% discount out of a hundred a hundred would be one Minus 2% minus 0.02 means that if we're not gonna get 2% We are gonna get 98% and we can just take that 98% times the 1,000 So when we're thinking about when we're going to a store and we see discounts on the store This might be an easier way to calculate. It's one step kind of way to calculate it We can just say that we have cash is going to be received 1,000 sales price times if we're gonna get a 2% discount we're collecting point 98% that's how much we are getting and enter So there's the cash that we're gonna get then I often like to think about The receivable going down because that's the normal thing that happens and this receivable needs to go to zero So this 1,000 needs to go to zero. So it has a debit balance. I need to make it go down I'm gonna do the opposite thing to it, which is a credit So I'm gonna copy that kind of put it here paste it one two three It's gonna be a credit not of the 980 though. It's gonna be a credit of the 1,000 Notice that if I put a credit of 98